5-year installment arrangement for loan and credit card debt

The button was pressed to take a decisive legal step that closely concerns millions of debtors in Türkiye. The new draft law submitted to the Turkish Grand National Assembly aims to alleviate the financial burden of loans and credit card debts that are in the implementation phase. Within the scope of the proposal, it is envisaged that the burden of interest and follow-up expenses of loans and credit card debts that debtors have difficulty paying will be completely erased. The most important point in the regulation is that it allows the principal amount to be paid by the debtor to be repaid in installments up to 5 years, taking into account economic conditions.

A new solution is sought for the debt spiral
Increasing inflation and the cost of living in recent years have deeply affected households' borrowing habits and repayment abilities. Many citizens were driven to bankruptcy by being crushed under the weight of interest on loans and credit cards they used to meet their basic needs. In the current system, trying to pay the minimum amount of the debt or facing the interest burden makes it almost impossible to reduce the principal of the debt. This situation causes citizens to fall into a “debt spiral” and hit financial bottom. The new proposal presented to the Parliament is intended to be a lifeline at this stage.

Experts confirm that these restructuring steps have social and economic dimensions. From a social perspective, debt relief can positively impact society's overall well-being and psychological well-being. From an economic perspective, reducing non-performing loans and reintegrating borrowers into the system is critical to the health of the banking sector and overall financial markets. However, it is expected that the regulation will be implemented correctly and with a fair mechanism, without disturbing the liquidity balances of banks.

What to expect next? Now all eyes are on the relevant commissions within the Turkish Grand National Assembly. Discussion of the proposal at the committee stage, development of the articles and the final voting process will determine the scope and applicability of the regulation. If the proposal becomes law, a new repayment period will begin for enforceable debt holders and debt liquidation will become more predictable. Details of the banks and debt types that will be on the list in the coming period will be closely followed by markets and citizens.